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How to Handle Living Expenses If You Lose Your Income

Unexpected loss of income is something that can happen to anyone at any time. But with the longest government shutdown in history still fresh in our minds, now's a good time to consider how you might handle the situation should it happen to you. For 35 days, over 800,000 federal employees had their income furloughed, leaving many so financially strapped they had to turn to food pantries to feed their families.

Being furloughed is a fact of life for many people in the U.S., not to mention being laid off or even fired.

There is food and nutritional assistance available for people who need it. But without steady income, what are some steps that can be taken to prevent defaulting on loans, falling behind on apartment rent or being late on monthly bills?

Below, we'll take a look at some financial strategies you can deploy during tough times.

Assess your finances.

"When you lose your job, the very first thing you should do is sit down and evaluate your finances and your budget," says Dennis Shirshikov, a financial analyst for FitSmallBusiness.com. "Be realistic with yourself and try to understand exactly how long your savings and any credit you have access to will last you."

It's helpful to list out and prioritize all of your recurring bills. Obviously, skipping rent or your mortgage payment is unavoidable if you want to keep a roof over your head. Ditto for utilities bills like electricity. Paying your student loans won't put food on the table, but it's good to keep up with them in order to maintain good credit. Your cable bill, on the other hand, is probably expendable.

Other expenses, such as food, are crucial, but not fixed. How much you spend is flexible, and can be mitigated with savvy shopping and coupons.

Get a clear idea of how much you typically spend under normal circumstances, and then assess how much you actually need to spend should you suddenly lose your income.

Request deferrals.

Luckily, there is more wiggle room on some of your bills than you might think.

"If you plan on missing bill payments, the best policy is always communication," Shirshikov says. "By calling your credit card companies or utility companies and letting them know you will likely miss a payment, you can work together toward a solution. Most credit cards offer three months of deferred payments. However, you will still be charged interest during that time."

Even if you aren't able to work out a deal, you can still protect your credit score. "If you are going to be missing payments, you can freeze your credit report," Shirshikov says. "Initially developed as a way to combat identity theft, you can use this feature to your advantage by temporarily preventing your credit from changing while you aren't making payments."

Joy Hearn, founder of Cards and Clips — a Facebook page that focuses on survival with limited income — has dealt with the trauma of furlough before. In 2012, she lost her income when she was five months pregnant and her husband had recently been laid off.

"Immediately contact your student loan company," she says. "Most [companies] have a deferral program that will allow you to skip payments for a period of six to 12 months as long as you can provide proof of your hardship. Most car loan companies will allow you to defer two payments per year, as long as you have not recently requested a deferment."

If things are really bad, you might have some breathing room with your apartment rent. You definitely shouldn't skip payments. But don't be afraid to call your landlord to explain what's going on.

"Typically, landlords don't want to go through the trouble of hiring an attorney and going through the eviction process," Shirshikov says. "Additionally, many states protect renters from eviction until a certain number of days without payment has passed."

Cut out everything that's unnecessary.

If you're following these steps, you've already identified the expenses you have to pay in order to survive versus the expenses that aren't totally necessary. When it comes down to it, you need to focus all financial resources on what matters most.

For example, Hearn says that instead of paying $100 per month for cable, downgrade to a basic digital receiver. Instead of eating out, cook your meals at home. Also, know that it's OK to sit out on social gatherings if your finances aren't in order. "There's no law that says you have to make it to everything you're invited to," she says.

Use the resources available to you.

Losing your main source of income doesn’t necessarily mean you'll be totally cut off from all financial resources.

"File for unemployment immediately if you qualify," Hearn says. "The sooner you get the ball rolling, the higher your chances [will be] of being able to keep current on most of your bills."

Nathan Grant, a financial industry analyst for Credit Card Insider, suggests borrowing money if necessary. Personal loans can be secured from your bank or credit union. You can also consider a balance transfer credit card, which could have a 0 percent introductory APR. "The interest-free period could be your ticket to financial freedom after recovering from debts accrued while you were without your primary income," he says.

Losing your primary source of income can be upsetting, but it doesn't have to be traumatic. Follow these steps to protect your financial well-being until you're back on your feet.

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